THE VALUATION OF MINES AND OIL PROPERTIES 247
Valuation for Taxation Purposes. — Whether it is desirable
from an economic standpoint to tax the ore bodies in the pos-
session of mining companies is an open question that has been
hotly debated by engineers and economists. Different methods
of taxation have been suggested:
(1) Taxation based on surface improvements only.
(2) Taxation based on estimated value of the ore body and
surface improvements.
(3) Taxation based on foot-acre” or “royalty” value
and on empirical methods of valuation.
(4) Taxation based on annual production or gross proceeds.
(5) Taxation based on annual profits or net proceeds.
Probably the earliest popular method of taxing mining
properties was to tax only their surface improvements. It
was not considered advisable to tax an industry that was of
such economic value to a community. Also because of the
risks of the business it was deemed necessary to make mining
investments as attractive as possible to the capitalist and not
to hamper operations, particularly in the early stages, when
an enterprise was just getting on its feet. The history of the
mining industry in this respect is similar to that of public
utilities, which have anticipated and facilitated the growth of
population in the territory served. Just so long as the operations
were conducted at a risk the public showed no desire to interfere
or to assume responsibility, but once the investments have be-
come firmly established and are earning a reasonable interest
on the capital investment regulation of the utility with its
accompanying embarrassments has been commenced and the
practice of allowing the company a return on its depreciated
“fair ” value and not on its investment has sprung up.
In the case of the mining properties it became apparent that
the large coal, iron and copper operations after a successful
struggle for existence had become profitable and represented a
very large portion of the business of certain communities. Taxa-
tion above a mere tax on surface improvements was proposed
and has become an established practice in many states.
